Maximum term contracts – what and why
Maximum term contracts offer employment for a specific role, for a stated maximum period, but will often contain a clause that allows for either party – employer or employee – to terminate the contract earlier, if proper notice is given.
These differ from fixed term contracts that, while substantially the same, offer no option for early termination.
Such an employment contract may be useful where there is uncertainty regarding required staffing levels, perhaps due to customer volatility, seasonal issues, the uncertain introduction of a new product, or the absence of employees due to leave or ongoing illness.
In genuine circumstances, provided all protocols are followed, the contracts can work well. However, they are not designed merely as a convenient administrative tool to shirk potential unfair dismissal claims.
A little history
The Fair Work Act generally defines that an employee only has a case for unfair dismissal where the employment was terminated at the employer’s initiative. Quite obviously, there is a potentially far larger picture here where there is, for example, fraudulent behaviour and so on. However, the basic premise refers to the act of employer initiative. At first glance, it would seem obvious that if a maximum term contract specifies an end date, and that date is reached with no further employment offered, then the employment has terminated purely because of the passage of time and for no other reason. The at the employer’s initiative action is not the culprit, so there is no case for unfair dismissal.
That seems straightforward, and this view was largely confirmed by the Justice v Lunn case back in 2006, which essentially held to that logic.
What has changed?
As with many aspects of life, things have become more complicated.
A 2017 unfair dismissal case, Saied Khayam v Navitas English Pty Ltd, found for Navitas, however, Mr Khayam was given leave to appeal, and the full bench of the Fair Work Commission (FWC) agreed with Mr Khayam. While the details of that decision, and the reasons for it, are far too involved for this forum, it perhaps leads to the conclusion that employees who don’t have maximum term contracts renewed can now file for unfair dismissal successfully. Or does it?
Fast forward to 2021 and the case of Michael Nasr v Mondelez. Mr Nasr had worked through 8 successive contracts over a 2.5-year period, at the conclusion of which, no further work was offered. Surely Mr Nasr had a reasonable expectation of ongoing work? The FWC examined the case in detail and found for Mondelez. That finding might seem incongruous, however, it is vital to compare apples to apples.
It has become apparent that the FWC examines these cases in far greater detail nowadays, and on an individual basis. Many factors are involved, including:
- Were successive contracts for the same work, or did the job, or the department, vary?
- What was the nature of the complete employment relationship, as opposed to one contract seen in isolation?
- Was the employee clear on the expectations following each contract, or were the contracts more of a convenience?
- Had the employee been given expectations of ongoing work, even if by casual written or verbal communication?
These are merely a brief, plain-language overview of some of the complex considerations examined. Every case is different, and each is treated on its unique merit. Employers need to make sure that their maximum term contracts are appropriate in intention, and precisely implemented in practice.